Cuban investments still remain unsafe

Cuban investments still remain unsafe

Published on Sunday, 27 April 2014 23:33 - Written by



If you had to point to a single factor that has done the most good for

the poor of the world, it might be the recognition of property rights.

But the Cuban government's abysmal record on property rights is why that

country remains so poor that food is rationed — in a rich tropical land

capable of growing anything.



And that record on property rights is why Cuba's new "foreign investment

law" is doomed to fail.



"Cuba's parliament approved a new foreign-investment law that for the

first time allows Cubans living abroad to invest in some enterprises

(provided, according to Rodrigo Malmierca, the foreign-trade minister,

they are not part of the 'Miami terrorist mafia')," reports The

Economist magazine. "The law, which updates a faulty 1995 one, is still

patchy, says Pavel Vidal, a Cuban economist living in Colombia. It

offers generous tax breaks of eight years for new investments."



The problem with the plan is that foreign investors want to know their

investments are safe — at least, as safe as any other venture capital

investment. The Cuban government has a bad habit of nationalizing

successful businesses.



We saw this familiar pattern emerge when the Castro regime "allowed" the

purchase and sale of private residences, and private land development.

But that liberalization came with so many caveats that few investors

responded



"Investing in Cuba is only for the most steely-nerved," the Financial

Times newspaper reported in 2013. "Not only is there the vexed question

of potential claims on properties from exiled Cubans, the Cuban

government has a long, ignominious history of first encouraging and then

choking off economic liberalization. It relaxed restrictions on home

sales 15 years ago, only to reverse the policy a few years later."





The Cuban government is its own worst enemy. Few Americans truly support

the 55-year-old embargo, and most economists and political observers

agree that the embargo has failed.



So while a concentrated effort in Congress could result in the embargo

being lifted, the Castro regime's bad faith would likely keep big

American companies out — even if they were allowed in.



In fact, the embargo has worked against its own stated purpose of

bringing down the communist government.



How? Political satirist P.J. O'Rourke contends that commerce won the

Cold War as assuredly as a military build-up did.



"In the end we beat them with Levi's 501 jeans," he wrote in "Give War A

Chance." "Seventy-two years of Communist indoctrination and propaganda

was drowned out by a three-ounce Sony Walkman. A huge totalitarian

system has been brought to its knees because nobody wants to wear

Bulgarian shoes. Now they're lunch, and we're No. 1 on the planet."



He meant, of course, that free trade — and the natural human desire for

better living conditions (which at the time included Sony Walkmans) —

played a major part in the collapse of communism.



Free trade and foreign investment in Cuba could surely accomplish the

same thing there.



But as long as the Cuban government remains likely to steal those

investments, that outcome is unlikely.



Source: Tyler Morning Telegraph - Cuban investments still remain unsafe

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http://www.tylerpaper.com/TP-Editorials/198912/cuban-investments-still-remain-unsafe#.U15kZPmSwx4